Earnings call transcript: Aqua Metals Q1 2025 highlights operational strides

Aqua Metals Inc. (AQMS) reported a net loss of $8.3 million for Q1 2025, translating to $0.03 per share, amidst significant operational cost reductions and strategic shifts. The company, currently valued at $9.2 million in market capitalization, has seen its stock decline 87.94% over the past year. Despite the financial loss, the company made progress in its product innovation and operational strategies, though the stock saw a 3.85% decline in aftermarket trading, closing at $1.063. According to InvestingPro analysis, the stock appears undervalued relative to its Fair Value, though investors should note its weak financial health score of 0.93.

Key Takeaways

• Aqua Metals reduced plant operations expenses by 67.2% and administrative expenses by 27.2%.
• The company recorded a $5.2 million impairment charge for its Sierra Arc facility.
• Initial samples of nickel carbonate and mixed hydroxide precipitate were produced.
• The company is exploring cost-efficient locations and potential partnerships.

Company Performance

Aqua Metals has been focusing on streamlining its operations and improving its financial health. The company’s efforts to cut costs have been significant, reducing plant operations expenses by over two-thirds. This initiative is part of a broader strategy to enhance operational efficiency and focus on core competencies, such as battery recycling and innovation in critical minerals.

Financial Highlights

• Total cash for Q1 2025: $1.6 million
• Net loss: $8.3 million ($0.03 per share)
• Impairment charge: $5.2 million for Sierra Arc facility
• Raised $1.2 million through an At-The-Market offering

Market Reaction

Aqua Metals’ stock experienced a 3.85% drop in aftermarket trading, closing at $1.063. This decline comes despite a 4.25% increase during the regular trading session, reflecting investor concerns over the net loss and impairment charges. The stock remains near its 52-week low of $1.05, down 89% from its 52-week high of $9.98. Technical indicators from InvestingPro suggest the stock is in oversold territory, though investors should note the stock’s historically high price volatility. For detailed technical analysis and expert insights, consider accessing the comprehensive Pro Research Report available on InvestingPro.

Outlook & Guidance

Looking ahead, Aqua Metals is focusing on engaging with potential supply and offtake partners while exploring government support and policy opportunities. The company is also seeking project financing and partnerships to bolster its position in the critical minerals market. Future revenue forecasts for FY2025 and FY2026 stand at $1.2 million and $7.8 million, respectively.

Executive Commentary

CEO Steve Cotton emphasized the importance of resilience in the current market, stating, "In order to thrive, you’ve got to survive." Outgoing CFO Judd Merrill highlighted ongoing efforts to align with strategic financial partners, while Cotton noted the industry’s consolidation phase, saying, "This is consolidation time for players in Critical Minerals for sure."

Risks and Challenges

• Lithium prices remain below project financeable levels, posing a challenge for revenue growth.
• The company faces potential risks related to market consolidation and competitive pressures.
• Uncertainty in securing government support and policy alignment could affect strategic initiatives.
• The transition in leadership, with Eric West succeeding Judd Merrill, may impact strategic continuity.

Aqua Metals continues to navigate a challenging market environment with strategic cost reductions and a focus on innovation in battery recycling. The company’s efforts to align with industry trends and explore new partnerships are critical as it seeks to enhance its competitive position in the critical minerals sector.

Full transcript - Aqua Metals Inc (AQMS) Q1 2025:

Moderator: Any forward looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will be taking questions. Questions will be accepted on the call from analysts, and all other investors can submit a question using the webcast portal provided in today’s earlier press releases. We will take as many questions as we can in our available time slot.

And with that, I’d like to turn the call over to Steve Cotton, CEO of Aqua Metals. Steve, the call is yours.

Steve Cotton, CEO, Aqua Metals: Thank you, Bob, and thank you all for joining us today. I’m pleased to report on what has been an important first quarter for Aqua Metals as we continue to execute on our mission to build a low cost, resilient domestic battery materials supply chain. It’s been just over a month since our last call, but there are some important updates that we’ll discuss today. Joining me today are Judd Merrill, our chief financial officer, and Eric West, our incoming CFO. Judd will be making remarks on our q one results and answering questions today, and then we’ll begin transitioning from his role to Eric later this month and will continue as a consultant through August.

We’ll speak more on that shortly. So let’s begin with our operational updates, starting with what we have accomplished to build an adaptive platform for critical minerals recovery. In q one, we achieved three key technical and operational milestones position us at the forefront of battery recycling innovation. First, our product line expansion. We produced initial samples of nickel carbonate and mixed hydroxide precipitate or MHP, which align with our developing downstream partners’ needs.

These are not just technical wins. They unlock new revenue opportunities and enhance our developing customer and partner value proposition. Second, our LFP recycling breakthrough. We completed a successful engineering analysis and then lab and bench scale demonstration for lithium recovery from LFP batteries. As many of you know, LFP or lithium iron phosphate is poised to dominate both EV and stationary storage markets.

Importantly, our process can handle a blend of 50% NMC, or nickel manganese cobalt, and 50% LFP input, effectively doubling our lithium carbonate output and improving project economics. Third, our purity and performance advancements. We have continued to improve our battery grade lithium carbonate assays to meet specific and stringent potential customer specifications, which further strengthens our position as a trusted domestic supplier. So in short, as market needs evolve, so does Aqua Metals. We are continuously advancing our technology and adjusting our overall business and commercialization strategy to meet the challenges and seize the opportunities that we see ahead.

So now turning to our site strategy. We have entered into an agreement to sell property. This strategic move allows us to retire all of our debt, generate meaningful cash reserves, and reduce our holding costs by approximately a hundred thousand dollars per month. This decision is about resilience and flexibility. We are aligning our capital deployment with today’s market environment, characterized by lower lithium prices, uncertainty in our industry, and the tighter capital markets.

By lightening our footprint now, we gain the freedom to evaluate more cost efficient locations, ideally near the feedstock and offtake sources for which we are developing, which could both lower CapEx and introduce meaningful OpEx efficiencies as we advance towards commercial deployment. We remain fully committed to building our first commercial arc, and we’re actively engaged with our potential supply, offtake, and funding partners to determine the best path forward. Switching now to the leadership front. As I mentioned earlier, Judd Merrill will transition from CFO on May 16 after several years of dedicated service. Judd, we really sincerely thank you for all of your commitment and leadership through transformative times, and we all wish you the best on your next venture.

And directly related to Judd’s departure, we are pleased to welcome Eric West as our incoming CFO effective May 19. As many of you listening already know, Eric has six years of experience with Aqua Metals through his prior role, including VP of Finance. And we are also grateful that he has agreed to return to the company in the CFO role have every confidence in his ability to help lead us into this next phase. Judd will also ask Eric to introduce himself in a moment. So to summarize my comments as we look ahead, Aqua Metals is first, expanding and adapting its product portfolio and commercial plant economic model to match market conditions and where the critical minerals market is heading.

Second, managing capital prudently and adapting our strategy to strengthen our already well proven resilience as a company. And third, aligning the right leadership to deliver on our goals, including the previously announced recent additions to our board of directors adding key commercial and financial market expertise. We are operating with a clear eye on long term value creation, making the right moves at the right times to build a flexible, high performance business and maintain that resilience as we have to date. So with that, I’ll turn it over to Judd to walk through the financials. After that,

Judd Merrill, Outgoing CFO, Aqua Metals: we’ll open the call for q and a. Thanks, Steve. First, this being my last call as the CFO of the company, I want to take a moment to thank the shareholders, stakeholders, my colleagues, the board, and Steve for the trust and support in my role here over the last six and a half years. Sometimes, though, opportunity knocks, I have taken a new role in a competitive company to be announced soon. While I leave the role of CFO here in very capable guardianship of Eric West, Eric and I have known each other for and worked together for many years, including here at Aqua Metals, and I am providing consultancy to the company and to Eric through August for a seamless transition.

I thought I’d ask Eric to introduce himself briefly on this call. Eric, go ahead.

Eric West, Incoming CFO, Aqua Metals: Thanks, Judd and Steve, and to the board for giving me the opportunity to smoothly take the helm from Judd and help drive forward our future. I’m returning to Aqua Metals to take this role because I believe in the company’s value proposition, the strength of the team, and in my abilities to make a positive impact on the company’s future. I will leave it at that for now and look forward to engaging with shareholders and stakeholders directly in the near future. I’ll turn it back over to Jed now to cover the Q1 financials and Q and A.

Judd Merrill, Outgoing CFO, Aqua Metals: Thanks, Eric. Let me start my comments with our balance sheet. We ended the quarter with total cash of approximately $1,600,000 As we have reported, we have listed the Sierra Arc asset for sale. The sale will result in the retirement of all debt and produce cash proceeds while also reducing holding costs by approximately 100,000 per month. This decision adds cash runway allowing the company to evaluate more cost effective cost efficient locations for future development.

The Sierra Arc facility includes the building structure, the underlying land, and various permanent improvements that were previously classified construction in progress within the plant, property, and equipment on the company’s consolidated balance sheet. The total carrying value of the asset group was approximately 9,300,000.0 net of depreciation. An impairment charge of approximately 5,200,000.0 was recorded during the three months ended 03/31/2025. The company anticipates the sale will be completed during the February. I will move now to the income statement.

Plant operations decreased approximately 1,500,000.0 or 67.2% for the three months ended 03/31/2025 as compared to the three months ended 03/31/2024. The decrease was primarily driven by a reduction in payroll and related costs of approximately 786,000 resulting from workforce reductions implemented in August 2024 and continued reductions during the February. Additionally, professional fees decreased by approximately 390,000, and supplies, materials, inventory adjustments, and other overhead related expenses decreased by 309,000. General and administrative expense decreased 619,000 or approximately 27 2020.7% for the three months ended 03/31/2025 compared to the three months ended 03/31/2024. The decrease was primarily due to the re a reduction in payroll and related costs of approximately 737,000 and a 49,000 decrease in director’s fees.

These decreases were partially offset by an increase of 41,000 professional fees and a hundred and 26,000 supplies, materials, and other overhead expenses. For the three months ended 03/31/2025, the company recognized a noncash impairment of approximately 5,200,000.0 related to construction in progress for the facility. The impairment was the result of strategic shift and revised capital allocation priorities, which led management to discontinue development of the facility for its originally intended use. As a result, the carrying amount of the facility was reduced to reflect its estimated recoverable value. Our net loss for the three months ended 03/31/2025 was approximately 8,300,000.0 or a negative dollar and 3¢ per basic and diluted share compared to a net loss of 5,500,000.0 or a negative dollar and 5¢ per basic and diluted share for the three months ended 03/31/2024.

Now moving to the cash flow statement. Net cash used in operating activities during this period consisted primarily of our net loss adjusted for noncash items such as depreciation, amortization, and stock based compensation charges, as well as net changes in working capital. Net changes in investing of activities primarily included my minor previously committed fixed asset acquisition. Net cash provided by financing activities was 638,000 for the three months ended 03/31/2025, consisting of 1,200,000.0 net proceeds from the sale of Aqua Metals shares pursuant to the at the market offering or ATM, offset by 66,000 related to tax withholdings to cover RSU vesting and 500,000 principal payment made on notes payable. We are actively engaging with potential and strategic financial partners aligned with our long term strategy.

That concludes my remarks on the company financials. I will now turn it back over to the moderator for Q and A.

Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. And we’ll take our first question from Mickey Legg from Benchmark. Please go ahead, Mickey.

Mickey Legg, Analyst, Benchmark: Hey, guys. Thanks for taking my questions, and congrats on making it through another quarter. Judd, congrats on your new role too. You know, I I wish you the best. And, Eric, it’s it’s nice to meet you over the phone, and congrats on the new role as well.

So I guess just to start, you know, have to ask on the the Sierra Arc sale, you know, kudos to, you know, find use yourself some breathing room there. Could you just walk me through, you know, that process, you know, your thought process with that and exactly, you know, how much runway does this give you. And it seems like if I can read into this a little bit, there’s more of a focus on colocating now. Could you just, you know, correct me there if that’s right and and walk me through that? Thanks.

Steve Cotton, CEO, Aqua Metals: Hey, Mickey. Yeah. This is Steve. Thanks for the question. And I’ll I’ll start with the CEREC and kind of my view and the the industry as a whole.

And as as everyone’s looking at the the critical minerals industry is seen, I would say there are companies that have had to effectively cease operations due to large initial outlays and building what we would characterize as really large plants. And we’ve always been market aware and willing to pivot and willing to adapt the current conditions early enough, and that gives us kind of that pragmatic and survivor instinct that we’ve demonstrated in the past for those of you that have known us for a long time. Along with our own belief, most analysts and players in this industry do believe that it’s gonna thrive for those that survive. Selling the CR now gives us that hundred thousand dollar a month savings carrying cost and gets us that meaningful cash runway to continue to develop our commercial relationships with that pragmatic and what I would say is resilient shift in focus to build it when they come compared to, what the industry has been doing, which has been build it and then they will come. We’re fully committed to building the first arc once we finalize the off take and supply financing for the entire project, and our commercial discussions have led us to alternate locations.

And that could improve the CapEx and OpEx and other efficiencies, especially needed in the current market conditions to produce EBITDA that is bankable. And that’s really what we believe is the best approach given the current difficult market conditions and public policy shift, etcetera, is to is to do what we’ve done and to partner and go where the materials are versus bring the materials to us and not carry the load in the meantime. I’ll turn it over to Jud just to give another quick summary in terms of what it means for us economically on, you know, how it saves us money so we can be very clear on that.

Judd Merrill, Outgoing CFO, Aqua Metals: Yeah. Hi, Mickey, and thanks for your comments and and your questions. So the CRQ, we owe about $3,000,000 on that. That’s the only debt the company has left. And so anything that we sell above and beyond that price will add to our cash balance.

And so, you know, in the past and we’re still kind of in the same area of about 500,000 a month burn. And that’s just our base kind of, like, holding cost and and being a publicly traded and and employees and all that and and even some of the cost related to the work that’s still ongoing at our innovation center, which we still are operating and and running, you know, on ongoing basis. So, you know, we anticipate that, you know, we’ll be over that debt price quite a bit, and and that will just add to our cash balance and help with the runway.

Mickey Legg, Analyst, Benchmark: Got it. Okay. Okay. That’s clear. Alright.

And, yeah, that kind of segues into my next question, you know, which is related to the macro and how things have been so dynamic, I guess, you could put it. Has there been an uptick in customer inbounds given all, you know, the tariff announcements and discussions there. You know? It it seems like OEMs don’t really have a choice but to go domestic now for their lithium, but, you know, there’s clearly not a lot of domestic products. So I’m just curious, you know, what what sort of conversations you’re having there.

Steve Cotton, CEO, Aqua Metals: Yeah. It’s, an interesting time in the industry for sure. Everybody is trying to figure out what the public policy moving forward is going to be and how that translates to government support from a policy perspective, from a loan guarantee perspective, and from grant perspective, even grants that were previously issued or, in question. And so, that coupled with, the drop in lithium prices that are really frankly below, any project financeable, number for a mine, to consider opening up a new lithium mine, That is, got most analysts, and we agree with those analysts believing that this is a temporary bump in the road, so to speak. And that we will see those lithium prices, come up because it has to in order for the industry to really work.

Think of it like what the minimum price of a barrel per oil has to be. It’s the same type of a scenario. So we see, the industry in the meantime, looking not only at their own capabilities, but, looking at each other. And this is very common, when an industry, is new and maturing and hits a bump in the road that you see a phase of consolidation and a phase of, more open armed partnerships. And that’s what we’ve been experiencing is the activity level of engaging with not only the large players, but the medium and the small players, has really gone through the roof, which is a really positive thing because now everybody talking and trying to collectively figure out how to build this industry from the ground up in The US.

So we’re really encouraged by that. And like I said in my earlier comments, it’s, it is the game of survivor. And in order to thrive, you’ve got to survive. And so we’re very situationally aware and making sure that we continue to survive and be there for when this industry really starts to thrive.

Mickey Legg, Analyst, Benchmark: Got it. Got it. Okay. Understood. I thought the product line expansion and the LFP recycling was an interesting development, and, you know, it’s another example of how you guys are able to be nimble in this rapidly evolving industry.

And it seems like that being driven by some of these customer discussions you’re having and some of the the off take product that they’re looking for to meet some of their specifications. Could you just talk about the opportunity there and, you know, where, what the thought process is with that?

Steve Cotton, CEO, Aqua Metals: Yeah. Great. Thank you. That’s a great question, and I’d love to talk about that. So I would say our our advancements that we’ve announced this quarter are really two pronged.

And that is that firstly, we’re oriented to market partner responsiveness by our nature. So think of that as, like, have it your way. And that means making materials that fit as best as possible as the input for our downstream partners’ processes. And that greatly enhances and improves our off take opportunities, engagements with those customers because we’re we’re we’re gonna give it to them their way. Secondly, we’re really driving hard for optimization, and that is really to improve the plant economics iteratively.

So our process does continue to be the one, if not the only one, that could actually produce positive EBITDA, particularly with the suppressed metals prices and current marketplace conditions that we’re seeing. So with that focus on that optimization, we believe strongly that our operating cost at commercial scale could be much lower than the other processes. And that’s because they eliminate the need for massive amounts of one time use chemical cost, transport cost, processing cost, and costly and harmful waste streams that come about when you’re doing it with that methodology. And that we believe does two things. That optimization improves our margin profile at scale, and that provides what we believe is still a bankable plant build future that can be debt or project financed.

And then the second thing that does is that this key work allows us to further advance discussions we’ve been having with other adjacent players in the critical mineral space for Aqua Metals to also be an enabler in the form of licensing or joint venture or other win win arrangements. Because we have the IP, we have the two plus years of demonstrating lithium aqua refining that have produced battery grade materials, and we have the proof of the economic and environmental and worker safety advantages. And that’s what we believe is at the largest scale of battery grade materials production from recycling by us thus far in The US.

Mickey Legg, Analyst, Benchmark: Great. Great. And then lastly, I just have to throw in one about government discussions and the White House. I know I asked last call, and, you know, you said it might take a couple months for those to progress and to get a bit better line of sight into how those may go. Is there anything more you could tell us?

You know, are those active? I see, you know, your mission at creating, you know, domestically produced product that’s very aligned with this administration’s desire to create this supply chain locally here in The US? Thanks.

Steve Cotton, CEO, Aqua Metals: Yeah. So, the the government side, is kinda we discussed in the last conference call. We’ve we’ve been engaging the various stakeholder agencies, and that includes things like the DOD, the DOE, etcetera, etcetera. And we’re taking full advantage of the opportunity, but we don’t have specific feedback yet. And we’ve been advised by our well respected DC based government relations partner, that it will likely take a few more months to gain a little bit more clarity of what the go forward policy and then following with that policy, the funding support will or won’t be for the industry.

That said, we are aligned with the administration’s interest in securing the domestic supply chain and keeping all these critical and valuable materials in The US where they can then be reintroduced into The US manufacturing operations, creating manufacturing jobs rather than really the current conditions where effectively The US is a net exporter of critical materials in the form of black mass that goes to Asia and an importer of the battery cells and systems that come back as a net importer. And everyone agrees on that being a major problem and a major priority to address. And so we’re really hopeful and active in trying to affect the outcome to see government support really kick in in this space again later this year.

Mickey Legg, Analyst, Benchmark: Got it. Okay. That’s all for me. Thanks, guys.

Moderator: Thanks, Nikki.

Operator: Once again, that’s star one if you do have a question or comment. And I’ll turn the floor over to Bob Myers for additional questions.

Bob Myers, Questioner: Yes. Thank we thank you. We have received a few questions. First questions, are potential partners testing the quality of your more recent material that you’re producing?

Steve Cotton, CEO, Aqua Metals: Yeah. That’s a good question. So, yes, the the primary focus of our pilot demonstration plan operations continue to today and beyond in our innovation center here in Tahoe Reno Industrial Center continues to be producing and assaying ourselves product samples and sending those samples and testing varying feedstock sources to create those samples and getting those materials in the hands of all these potential off takers that we’ve been talking to, like I was mentioning earlier. We’ve continued doing this in q one through now. And those commercial relationships, of course, really underpin the financing of moving forward with that commercial scale facility.

Bob Myers, Questioner: Great. Thank you. The next question is similar. With the appropriate financing for Anarch, how quickly can these new initiatives translate into revenues?

Steve Cotton, CEO, Aqua Metals: Yeah. So even with the Sierra Arc, we would need to build an additional building. So we believe that we could potentially improve time to market by taking a suitable building or buildings that already exist, such as a brown field sitting somewhere else in the country closer to supply and offtake partners that we’re talking to. And that could be better suited to our new plant layout process flows, with these improvements that we made by adding the LMP, mixing it in with the NMC, and producing these other products to be able to produce EBITDA, at the maximum level. And, as I already pointed out, we’re in several discussions with these adjacent players in the industry that already have facilities, and we can be an enabler for them.

And that means making their EBITDA producing value proposition and time to market greater and faster, and that might allow for improvements for them in those types of scenarios. One company in in this industry cannot do it all. So we believe that in addition to helping ourselves, we’re positioned uniquely to be able to help all the other companies do it better.

Bob Myers, Questioner: Got it. Thank you. Pivoting a little to the financials and Judd in particular, can Judd tell us a little bit more about his departure?

Judd Merrill, Outgoing CFO, Aqua Metals: Yes. Sure, Bob. So this decision was based kind of on a a long term opportunity that advances my career in a in a noncompetitive opportunity, and it’s not related to Aqua Metals. You know, it’s really been a pleasure. I’m I’m seriously being here at Aqua Metals and being the CFO, and I wish the best for the team.

And that’s why I’m available during a transition period. We’ve worked out a ninety day plus consulting period where I can help smoothly transition my role to Eric, the incoming CFO. You know, and I’ve I’ve worked with Eric for quite a bit of time, not only at Aqua Metals, but in a prior role, and and I have full confidence, in him and and a go forward plan with that.

Bob Myers, Questioner: Great. Thank you. And we have, I think, one more question for you. Can you expand a little bit on your early remarks around near term and long term financing opportunities?

Judd Merrill, Outgoing CFO, Aqua Metals: Yeah. So start we’ll start with the near term. You know, that’s been driven by our desire to, you know, retire some existing debt by the end of this cup this quarter that we’re in now, and that’s gonna revert reduce burn. So we’ll be making interest payments and other holding cost, and that helps our cash run rate. Also, near term financing has included the judicious use of the ATM and potential asset disposition of, like, fungible equipment.

And as we announced today, real estate that won’t be we don’t need to be bearing the cost, you know, for at this time. And then on the long term, you know, a lot of this has remained the same. Just trying to find the right partner for project financing, and they’re still in debt based finance capital. And we’re still having discussions and and, you know, advancing that. And there’s some opportunities there, that we’re continuing to have.

We’re also having, directly related discussions about feedstock and offtake partnerships that make the financing the first, arc bankable. And then also how we can work together with these partners to fund the go forward strategy.

Operator: Excellent. Thank you. And that’s all the time we have for questions. I’ll now turn the floor back to Steve Cotton for closing remarks.

Steve Cotton, CEO, Aqua Metals: Great. Well, thank you, operator. And, you know, I’ll just close by saying, this is consolidation time for players in Critical Minerals for sure. And consolidation also means partnerships. We’ve seen, for example, in one example, Lighten acquired many of NorthFull’s assets and many other instances of consolidation and partnering.

And this is really common with the development of any industry that hits the proverbial bump in the road. And we’re definitely paying intention engaging with all the opportunities with all the parties that are out there. And where it makes sense, we’ll explore a better way forward on that front. But in the meantime, we’ve really added to the resilience and the runway of the company with the the courageous decisions that we’ve made as a management team to date. And I feel very confident in our ability to continue to survive to make the day that we shall thrive.

And I thank everybody for your support and continued confidence in Aqua Metals, and we will see you soon.

Operator: Thank you. Ladies and gentlemen, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.

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